SEC Clarifies Rules for Social Media Use

The complaints stemmed from analysts who believed his comments about the streaming video service topping 1 billion hours amounted to material disclosure on a platform that wasn’t public and equally accessible to all investors.

But the SEC has now found that companies *can* use social media platforms to announce information and make statements like this – as long as investors are told to look there. So the key point here seems to be that as long as investors – and others – know that statements will be made on Twitter, Facebook or other platforms, the onus is then on them to check those platforms regularly so they’re not left behind.

One of the questions raised by this ruling is how free it allows company officers to be in using their personal accounts for corporate statements. There’s no hard and fast answer to that, though, since it’s going to depend from one case to the other both on the executive in question and the market that company operates in. If an individual never talks about his position or company on Facebook, then it makes no sense for it to suddenly become part of a disclosure program.

On the other hand, if an executive regularly shares such information, then it’s important for the company to work with the executive to make sure this is being done in an orderly – and adequately disclosed – manner. Ideally these sorts of posts are coordinated with the investor relations team and, even before that, investors and analysts would be told that someone’s personal profile will, from time to time, contain important and material information.

That communication to investors is the first – and most important – part. Ideally this is something that’s done over a period of time, perhaps even months, before the executive in question begins posting relevant information to his or her account. This will allow enough time to make sure that everyone has seen at least one of the warnings and adjust their own reading and research to compensate and incorporate that into their routines and research.

The question remains, though, how a corporate profile might be used for the same purposes. This is a bit thornier since, particularly when you’re talking about B2C companies, most of those profiles are meant to speak to customers and not investors. So a message including forward-looking guidance on earnings is going to seem tremendously out of place on such a profile.

A third alternative may be the creation of investor-specific social profiles that are meant to only speak to the financial community without intruding upon consumer messaging.

All that being said, immediate action items for social media counselors include:

Review the new SEC guidelines with investor relations and other relevant teams and individuals

Discuss how executives are or aren’t currently using their personal profiles for corporate messaging

Evaluate whether existing corporate social networks could – or should – support this kind of material

Discuss whether investors and analysts have already been made aware of existing social profiles that are relevant to the company, whether personal or corporate.